China’s factory activity unexpectedly swung to growth in May from decline, a private sector survey showed on Thursday, driven by improved production and demand, helping struggling firms that have been hit by slumping profits. The Caixin/S&P Global manufacturing purchasing managers’ index, or PMI, rose to 50.9 in May from 49.5 in April, above the 50-point index mark that separates growth from contraction. The reading surpassed expectations of 49.5 in a Reuters poll, a stark contrast to a deeper contraction activity seen in the official PMI released on Wednesday. China’s recovery from its strict Covid curbs has been fragile and uneven, with economic indicators for April showing imports, factory gate prices and property investment all falling. “We need more time to see whether the improvement would be sustained, but it is a piece of good news for the Chinese economy,” Zhou Hao, economist at Guotai Junan International, said in a note. “Further policy support is still required to boost domestic demand, we reckon a 10 bps MLF rate cut in June,” he added. It’s too early to give up on the Chinese recovery, says China Beige Book’s CEO Leland Miller

The manufacturing subindexes showed factory output rose at the fastest clip in 11 months while new orders including new exports expanded in May.

“Current economic growth lacks internal drive and market entities lack sufficient confidence, highlighting the importance of expanding and restoring demand,” said Wang Zhe, Senior Economist at Caixin Insight Group. Further monetary policy easing is expected by some economists. “The central bank will likely cut the reserve requirement ratio by 25bps to maintain financial stability, in our view,” said ANZ in a research note on Wednesday. “The likelihood of frontloading the rate cut is also rising.” The Caixin PMI is believed to focus on more export-oriented and small firms in coastal regions and is compiled by S&P Global from responses to questionnaires sent to purchasing managers in China. NN: China is in a vast reopening… Even if the spin AI doctors are trying to convince you of a vast china slow down. Not true!! They are purchasing record amounts of oil. And they are consuming it… Did I mention its a binary oil trade?

Japan’s manufacturing sector back to growth in May

The activity in Japan’s manufacturing sector saw a return to growth in May, with the Jibun Bank Manufacturing Purchasing Managers’ Index (PMI) rising from April’s 49.5 and coming in at 50.6, S&P Global said in its newest report. The document underscored a general improvement in business conditions and increased confidence within the sector. It stressed that May observed the fastest strengthening in output levels in 2023 and the first rise since June 2022. Additionally, the report also warned about a further decline in purchases and a possible shortage of semiconductors. On the other hand, it noted generally improved access to materials. “Hopes of a reduced squeeze on operating margins, alongside rising confidence regarding the broader economic outlook, underpinned the strongest output growth expectations among manufacturing firms since the start of 2022,” S&P Global Market Intelligence Economics Director Tim Moore commented.